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Boeing ( BA ) very slow to ramp up 737 MAX output post-strike

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MAX production started more than a month after strike

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Suppliers reluctant to hire back staff furloughed during

strike

By Allison Lampert, Dan Catchpole

SEATTLE, Dec 12 (Reuters) - Since a crippling strike at

many of Boeing's ( BA ) U.S. plane factories ended more than a

month ago, progress ramping up production of its best-selling

737 MAX jet has been deliberately slow.

Safety inspectors inside the 737 MAX factory outside Seattle

laboriously scoured half-constructed planes for flaws they may

have missed during the seven-week work stoppage.

Other workers poured over manuals to restore their expired

safety licenses. The factory was initially so lifeless in

mid-November that one employee left early because the bins of

fasteners he was tasked with replenishing weren't being used,

according to a source inside the plant.

The result: no new 737 MAX plane has been completed. Boeing ( BA ) said

on Tuesday that it had restarted MAX production last week, as

first reported by Reuters.

Boeing's ( BA ) cautious approach, following criticism that the

planemaker for years rushed production, has garnered praise from

regulators and some airline CEOs.

But it also has some smaller suppliers who cut jobs or

operating hours during the strike hesitating to staff-up again,

creating further uncertainty in an already fragile supply chain,

according to three suppliers, one analyst and an industry

source.

Both Boeing ( BA ) and rival Airbus have struggled to meet

production goals due to supply chain delays. Boeing ( BA ) CEO Kelly

Ortberg in October told analysts he was anticipating a bumpy

return from the supply chain post strike.

Parts that used to take a day to be finished at a processing

shop now take a week, one supplier told Reuters.

This account of Boeing's ( BA ) effort to restart production of

its strongest-selling jet is based on interviews with a dozen

Boeing ( BA ) factory workers and 10 suppliers, most of whom spoke on

condition of anonymity because they are not authorized to talk

to the media.

It shows that Ortberg is sticking to his pledge to

cautiously restart 737 MAX production, prioritizing safety and

quality due to heightened regulatory scrutiny following a

January mid-air panel blowout on a near-new plane.

The interviews also revealed that some suppliers are still

struggling to recover from the strike, after wrestling with

slumping plane production during COVID-19, and the 2019 MAX

grounding following two fatal crashes involving the model.

Boeing ( BA ) "will continue to steadily increase production as we

execute on our safety and quality plan and work to meet the

expectations of our regulator and customers," Boeing ( BA )

spokesperson Jessica Kowal said. "We will also continue to work

transparently with our suppliers, listening to concerns and

looking for opportunities to improve collaboration to ensure our

entire production system operates safely and predictably."

FAA IN THE FACTORY

After weeks of inertia, there were fresh signs of movement

inside Boeing's ( BA ) Renton 737 MAX factory last week, three sources

said, with green fuselages entering the final assembly line

where the wings and tail get attached.

The restart, while not bringing immediate relief, is good

news for financially-strapped fuselage supplier Spirit

AeroSystems ( SPR ) which was running low on storage space

during the strike. A Reuters reporter saw over 100 MAX fuselages

lined up at Spirit's Wichita factory this week.

Spirit Aero spokesperson Joe Buccino said the company was

"working closely with Boeing ( BA ) as they restart production."

Boeing ( BA ) executives have privately said they hope to produce 15 to

20 MAX jets this month, two of the 10 suppliers and one industry

source said, although one of them cautioned that the chance of

hitting the higher end of that target is unlikely. The Boeing ( BA )

spokesperson did not comment on those numbers.

Boeing ( BA ) typically closes most planemaking operations between

Dec 24 and January 1.

While Boeing ( BA ) doesn't disclose production figures, the

planemaker said in October that before the strike it was

preparing to hit a target of 38 737 jets per month by year's

end.

At the factory, daily tasks are paired with exacting efforts

to clean up and take steps to avoid error, with note-taking FAA

officials carrying clipboards and donning reflective vests a

regular sight, they said.

FAA Administrator Mike Whitaker praised Boeing ( BA ) on Dec 5 for

not following past practice by immediately restarting production

after the strike, instead focusing on workforce and training.

Still, Whitaker told Reuters that Boeing ( BA ) has a long journey to

achieve its targeted safety culture. "The plant's cleaner, as

you would expect, but they're frank about the fact that they've

got a long way to go," he said.

Stabilizing Boeing's ( BA ) MAX production is key both for the

planemaker and for the financial health of its supply chain on

the jet with 4,200 outstanding airline orders and which is

expected to drive revenues for years to come

Six out of the 10 suppliers told Reuters they won't bring

back workers before 2025, partly because they are unsure whether

Boeing ( BA ) will need to again change its production plans.

Two suppliers said they were told by Boeing ( BA ) that the

planemaker is expected to give a private update on a key

internal 737 supply chain production milestone for the supply

chain, this month.

"Supplier trust in Boeing ( BA ) rates is at a low point," said

Glenn McDonald, a supply chain specialist at U.S. aerospace

consultancy AeroDynamic Advisory, which advises clients in areas

like business and corporate strategy.

"Suppliers have been burned before by investing for rates

that didn't come ... that doubt becomes a self-fulfilling

prophecy."

BRUISED SUPPLIERS

In the short term, Boeing ( BA ) can likely count on excess parts

and components it has amassed this year to build its planes

since until the strike it largely continued purchasing from

suppliers at a higher rate than it needed because it was

producing fewer jets due to the blowout.

Then, purchasing largely slumped during the strike. As

production comes back online, supplier skepticism over Boeing's ( BA )

rates could impede needed investments to meet Boeing's ( BA ) plans for

a return to a rate of 38 and above next year, according to three

suppliers, McDonald and an industry source.

Boeing's ( BA ) struggles mean it will take longer to return 737

MAX production to its pre-strike levels than after a 2008 work

stoppage, when the planemaker got back to a monthly rate of 31

in about 25 days, McDonald said.

That longer recovery is being acutely felt by some of the

hundreds of small suppliers that dot Boeing's ( BA ) manufacturing

heartland in Washington state.

Smaller aerospace suppliers are less bullish on making capital

investments than many of their larger counterparts, said

Christopher Chidzik, principal economist at the Association for

Manufacturing Technology, a trade group.

In October, despite the Boeing ( BA ) machinists strike, aerospace

producers increased orders of manufacturing technology to the

highest level of 2024, indicating that they used the downtime to

replace and expand technology used on production lines, he said.

Smaller job shops went against that trend, he added.

Seattle-area supplier Rosemary Brester hoped she and her

husband would be able to get their metal aircraft components

processed more quickly following the end of the strike, but

delays persist.

The couple, who have been running Hobart Machined Products

since 1978 out of a workshop beside their home, rely on a

finishing specialist to anodize and paint their precision parts

before sending them to larger companies that sell to Boeing ( BA ).

This used to take a day, now it takes a week, because the

finishing specialist has been short-staffed since laying off

workers during the strike.

"All we can do is manufacture to the schedule we have, maybe

expedite parts and pay a bit more to get them to our customers

on time," she said.

"Until I see some real stability, I'm not going to hire

anybody," Brester said.

Carmen Evans, co-owner of New Tech Industries in Mukilteo,

Washington near Boeing's ( BA ) colossal Everett factory complex, said

the small supplier is ready to produce more specialized tooling

for its largest customer. But they are now in a type of limbo as

they wait for Boeing's ( BA ) MAX factory to start humming again.

"It's not like the floodgates have opened up yet," she said.